We
saw our financial results improve versus Q3 2008. Revenue growth turned
positive and Contribution dollars are up 26% over last year due to higher gross
profit and a more efficient marketing spend. Our net loss has narrowed to 0.4%
of revenue. For the first nine months of 2009, our net loss is $2.5 million, an
$11.2 million improvement over the same period last year.

As
we move into our peak selling season, our inventory is good and we are well
positioned to deliver great deals to the cost conscious consumer.

As previously announced, we have received a
notice from the Securities and Exchange Commission stating that the SEC is
conducting an investigation concerning our previously-announced financial
restatements of 2006 and 2008 and other matters. The subpoena accompanying the
notice covers documents related to the restatements and also to our billings to
our partners in the fourth quarter of 2008 and related collections, and our
accounting for and implementation of software relating to our accounting for
customer refunds and credits, including offsets to partners, and related
matters. We have been and will continue to cooperate fully with the
investigation. In addition, we have
received a comment letter from the SECs Division of Corporation Finance
regarding our 2008 Form 10-K/A and June 30, 2009 Form 10-Q.
We have responded to the comment letter, but have not yet resolved all of the
staffs comments.

I
look forward to discussing your business with you on our conference call, and
until then, I remain,

Total
revenue  Total revenue for the three months ended September 30, 2009 and
2008 was $195.1 million and $186.9 million, respectively, a 4% increase. For
the nine months ended September 30, 2009 and 2008, total revenue decreased
3% to $558.6 million from $578.5 million.

Gross
profit  Gross profit for the three months ended September 30, 2009 and
2008 was $37.7 million and $32.1 million, respectively, a 17% increase,
representing 19.3% and 17.2% of total revenue for those respective periods.
For the nine months ended September 30, 2009 and 2008, gross profit was
$111.3 million and $99.3 million, respectively, a 12% improvement, representing
19.9% and 17.2% of total revenue for those respective periods.

For
the nine months ended September 30, 2009, we reduced total Cost of goods
sold by $1.7 million due to recoveries from partners who were underbilled
in 2008 for certain fees and charges, and for a refund of overbillings by
a freight carrier for charges from the fourth quarter of 2008. These recoveries
accounted for 31 basis points of the 270 basis point improvement in gross
profit from the nine months ended September 30, 2008. Without this
reduction, gross profit for the nine months ended September 30, 2009 would
be $109.5 million (19.6% as a percentage of total revenue), a 10% increase from
the nine months ended September 30, 2008 rather than the 12% increase
described above. In the third quarter of 2009, we recognized $117,000 of
recoveries from partners and a freight carrier for charges related to 2008.

In
September 2009, we executed a new supplier agreement with a majority of
our fulfillment partners with the goal to better manage costs related to
product returns. The impact of this change resulted in a reduction of Cost of
goods sold related to our fulfillment partner business of approximately
$350,000 in Q3 2009.

Contribution
(a non-GAAP financial measure) and Contribution margin (a non-GAAP financial
measure)  Contribution for the three months ended September 30, 2009 and
2008 was $25.5 million (13.1% Contribution margin) and $20.2 million (10.8%
Contribution margin), respectively, a 26% increase in Contribution, or a 230
basis point improvement in Contribution margin, when compared to the same
period in the prior year. For the nine months
ended September 30, 2009 and

2008,
Contribution was $74.4 million (13.3% Contribution margin) and $58.1 million
(10.0% Contribution margin), respectively, a 28% increase, or a 330 basis point
increase when compared to the same period in the prior year.

Contribution
(a non-GAAP financial measure) (which we reconcile to Gross profit in our
statement of operations) consists of gross profit less sales and marketing
expense and reflects an additional way of viewing our results. Contribution
Margin is Contribution as a percentage of revenues. When viewed with our GAAP
gross profit less sales and marketing expenses, we believe Contribution and
Contribution margin provide management and users of the financial statements
information about our ability to cover our operating costs, such as technology
and general and administrative expenses. Contribution and Contribution Margin
are used in addition to and in conjunction with results presented in accordance
with GAAP and should not be relied upon to the exclusion of GAAP financial
measures. You should review our financial statements and publicly-filed reports
in their entirety and not rely on any single financial measure. The material
limitation associated with the use of Contribution is that it is an incomplete
measure of profitability as it does not include all operating expenses or
non-operating income and expenses. Management compensates for these limitations
when using this measure by looking at other GAAP measures, such as operating
income (loss) and net income (loss).

For
further details on Contribution, see the calculation of this non-GAAP financial
measure below (in thousands):

Three months ended

Nine months ended

September 30,

September 30,

2008

2009

2008

2009

Total
revenue

$

186,855

$

195,081

$

578,505

$

558,591

Cost
of goods sold

154,736

157,412

479,206

447,323

Gross
profit

32,119

37,669

99,299

111,268

Less:
Sales and marketing expense

11,934

12,187

41,197

36,849

Contribution

$

20,185

$

25,482

$

58,102

$

74,419

Contribution
margin

10.8

%

13.1

%

10.0

%

13.3

%

Sales
and marketing expenses  Sales and marketing expenses totaled $12.2 million and
$11.9 million for the three month periods ended September 30, 2009
and 2008, respectively, representing 6.2% and 6.4% of total net revenue for
those respective periods. Comparing the third quarter of 2009 with the same
quarter of 2008, sales and marketing expenses increased 2%. For the nine month
periods ended September 30, 2009 and 2008, sales and marketing expenses
decreased 11% to $36.8 million in 2009 from $41.2 million in 2008, representing
6.6% and 7.1% of total revenue for those respective periods. The decrease in
sales and marketing costs was primarily due to more efficient marketing
spending in 2009.

Technology
expenses  Technology expenses totaled $12.4 million and $14.1 million
for the third quarters of 2009 and 2008, representing 6.4% and 7.6% of revenue
for the third quarters of 2009 and 2008, respectively. Comparing the third
quarter of 2009 to the third quarter of 2008, technology expenses decreased 12%
primarily due to decreased depreciation expense for technology equipment and
software development of approximately $2.7 million, which was partially offset
by an increase in compensation of approximately $1.5 million related to an
increase in technology staff.

For
the nine month periods ended September 30, 2009 and 2008, technology
expenses totaled $38.9 million and $43.9 million, respectively, representing
7.0% and 7.6% of total revenue for those respective periods, a decrease of 12%.
The decrease is primarily due to a $10.3 million decrease in expenses related
to depreciation of technology equipment and software development and the
expiration of an operating lease in Q2 of 2008 which was not renewed, which was
partially offset by an increase in compensation of approximately $5.0 million
related to an increase in technology staff.

General
and administrative (G&A) expenses  G&A expenses totaled $13.2 million
and $10.3 million for the three months ended September 30, 2009 and
2008, respectively, 6.8% and 5.5% of total revenue for those respective
periods. The $2.9 million increase in G&A expenses for the three
month period ended September 30, 2009 compared to the same period in 2008
is primarily attributable to an increase in compensation expense of
approximately $1.9 million related to an increase in general and administrative
staff, and an increase in legal expense of approximately $1.6 million; which was
partially offset as we recognized a reduction of legal expense of $683,000 from
a $2.75 million settlement payment discussed below.

For
the nine month periods ended September 30, 2009 and 2008, G&A expenses
totaled $38.8 million and $30.8 million, representing 7.0% and 5.3% of total
revenue for both periods, respectively. The increase of $8.1 million in G&A
expenses, which represents an increase of 26% for the nine month period ended September 30,
2009 compared to the same period in 2008 is primarily due to an increase in
compensation expense of approximately $5.9 million related to an increase in
general and administrative staff, which includes expense of $1.25 million
related to termination of a consulting arrangement with Icent LLC. Icent LLCs
chief executive officer is James V. Joyce, who resigned from his position as a
member of the Board of Directors on April 1, 2009.

The
increase in G&A expenses is also related to additional facilities expenses
relating to a new customer service center in the first part of 2009, increased moving
related expenses and an increase of legal expenses of approximately $2.0
million during the nine month period ended September 30, 2009 compared to
the same period of 2008; we incurred $4.2 million in legal expense for the nine
months ended September 30, 2009 compared to $2.9 million of legal expense
in the same period of 2008, which was partially offset as we recognized a
reduction of legal expense of $1.9 million from a $2.75 million payment that we
received from an insurer in the settlement of a dispute regarding insurance
coverage of a legal matter. The remaining balance of $859,000 is recorded
in accrued liabilities at September 30, 2009 in the accompanying
Consolidated Balance Sheets. Our future
recognition of amounts from the remaining balance is subject to a number of
contingencies, including our incurring further related legal fees.

Restructuring During the nine months ended September 30, 2009, we reduced our
accrued restructuring liability by $218,000 as a result of our subleasing
office space in our corporate headquarters earlier than originally anticipated.

Operating
loss  Operating loss for the three months ended September 30, 2009 was
$(154,000) compared to operating loss of $(4.3) million for the three months
ended September 30, 2008, a $4.1 million improvement. For the nine months ended September 30,
2009 and 2008, operating losses were $(3.1) million and $(16.6) million,
respectively, a $13.5 million improvement.

Other income (expense)  Other income of
$3.0 million for the nine months ended September 30, 2009, was due
primarily to gains from the early extinguishment of some of our 3.75%
Convertible Senior Notes (Senior Notes). During the three months ended June 30,
2009, we retired $2.5 million of our Senior Notes and recorded an $884,000
gain, net of amortization of debt discount of $29,000.

This
was in addition to the $4.9 million of Senior Notes that were retired during
the first quarter of 2009 when we recorded a $1.9 million gain, net of amortization
of debt discount of $63,000. We did not
retire any of our Senior Notes during the three months ended September 30,
2009.

Net
loss  Net loss for the three months ended September 30, 2009 was
$(787,000), or $(0.03) per common share, compared to a net loss of $(1.6)
million, or $(0.07) per common share for the three months ended September 30,
2008. For the nine months ended September 30,
2009 and 2008, net losses were $(2.5) million and $(13.7) million,
respectively, or $(0.11) and $(0.60) loss per common share for those periods,
respectively.

Adjusted
EBITDA  Adjusted EBITDA (a non-GAAP financial measure) for the three months
ended September 30, 2009 and 2008 was $3.8 million and $2.2 million,
respectively. For the twelve months ended September 30, 2009 and 2008,
Adjusted EBITDA was $19.7 million and $4.7 million, respectively.

Adjusted
EBITDA (a non-GAAP financial measure) (which we reconcile to Net loss in our
statement of operations) consists of earnings before interest, taxes,
depreciation, amortization, stock-based compensation, other income (expense)
and discontinued operations. Adjusted EBITDA is used in addition to and in
conjunction with results presented in accordance with GAAP and should not be
relied upon to the exclusion of GAAP financial measures. Adjusted EBITDA
reflects an additional way of viewing our results that, when viewed with our
GAAP results, provides a more complete understanding of factors and trends
affecting our results. You should review our financial statements and publicly-filed
reports in their entirety and not rely on any single financial measure.

We
believe that discussing Adjusted EBITDA at this stage of our business is useful
to us and to financial statement users, as Adjusted EBITDA is a reasonable
measure of the continuing operations of our business. As we made significant
investments in our infrastructure during 2005 and 2006 through large capital
expenditures, the result was increased depreciation expense in our income
statement. Therefore, in addition to net income or loss, which includes
recurring non-cash expenses such as depreciation, amortization and stock-based
compensation, we use adjusted EBITDA, which excludes all non-cash expenses, as
a measurement of cash generated by the business. We use Adjusted EBITDA to demonstrate the
difference between our GAAP net losses and actual cash being used or generated
by the business. The Adjusted EBITDA measurement also excludes non-operating
income or expenses and discontinued operations, as we use it to measure only
cash generated by the continuing operations of the business. We also believe
that our Adjusted EBITDA measure is consistent with similar EBITDA measures
used by other companies in our industry and measures used by industry analysts
in comparing companies within our industry.

The
material limitation associated with the use of Adjusted EBITDA is that it does
not address the potential impact on cash from changes in balance sheet
accounts, or from cash used for investing activities such as capital expenditures,
and therefore does not demonstrate the overall change in cash position or
liquidity of the business as a whole.
Management compensates for these limitations when using this measure by
looking at other GAAP and non-GAAP measures, such as the consolidated statement
of cash flows, free cash flow, and working capital, in conjunction with
Adjusted EBITDA, when evaluating the overall cash picture of the business. We also look at net income in conjunction
with Adjusted EBITDA in evaluating overall company performance, with the
overall goal of attaining GAAP net income/earnings.

Our
calculation of Adjusted EBITDA is set forth below (in thousands):

Three
months ended

Twelve
months ended

September 30,

September 30,

2008

2009

2008

2009

Net loss

$

(1,589

)

$

(787

)

$

(20,142

)

$

(1,483

)

Add back amounts for computation of Adjusted
EBITDA:

Depreciation and amortization, including
internal-use software and website development, and other amortization

5,580

2,946

24,634

14,816

Stock-based compensation expense to employees and
directors

990

835

4,378

3,339

Stock-based compensation to consultants for
services

(134

)



90

88

Stock-based compensation related to performance
share plan





(600

)

(1,300

)

Issuance of common stock from treasury for
401(k) matching contribution



185

(415

)

185

Interest income

(664

)

(11

)

(398

)

(616

)

Interest expense

847

941



3,376

Other (income) expense, net

(2,849

)

(297

)

(2,849

)

1,310

Adjusted EBITDA

$

2,181

$

3,812

$

4,698

$

19,715

Free cash flow (a non-GAAP financial measure)  Free
cash flow for the three months ended September 30, 2009 and 2008 totaled
$9.5 million and $(9.1) million, respectively. For the twelve months
ended September 30, 2009 and 2008, Free cash flow was $13.3 million and
$(805,000).

Free
cash flow reflects an additional way of viewing our cash flows and liquidity
that, when viewed with our GAAP results, provides a more complete understanding
of factors and trends affecting our cash flowsand liquidity. Free cash
flow, which we reconcile to Net cash
provided by (used in) operating activities, is cash flow from operations
reduced by Expenditures for fixed
assets, including internal-use software and website development.
Although we believe that cash flow from operating activities is an important
measure, since it includes both the cash impact of the continuing operations of
the business and changes in the balance sheet that impact cash, we believe free
cash flow is a useful measure to evaluate our business since purchases of fixed
assets are a necessary component of ongoing operations. Therefore, we
believe it is important to view free cash flow as a complement to our entire
consolidated statements of cash flows.

Our
calculation of Free cash flow is set forth below (in thousands):

Three months ended
September 30,

Twelve months ended
September 30,

2008

2009

2008

2009

Net cash provided by (used in) operating activities

$

(275

)

$

11,980

$

14,864

$

22,693

Expenditures for fixed assets, including
internal-use software and website development

(8,809

)

(2,486

)

(15,669

)

(9,441

)

Free cash flow

$

(9,084

)

$

9,494

$

(805

)

$

13,252

Cash
and working capital  At September 30, 2009, Overstock.com had Cash and
cash equivalents of $79.1 million.
Working capital was $34.1 million and $39.7 million at September 30,
2009, and December 31, 2008,

respectively. The decrease in our working capital is
primarily related to the retirement of our Senior Notes during the first six
months of 2009.

About
Overstock.com

Overstock.com, Inc. is an online retailer offering brand-name merchandise at discount prices. The company offers its customers an opportunity to shop for bargains conveniently, while offering its suppliers an alternative inventory distribution channel. Overstock.com, headquartered in Salt Lake City, is a publicly traded company listed on the NASDAQ Global Market System and can be found online at http://www.overstock.com. Overstock.com regularly posts information about the company and other related matters on its website under the heading Investor Relations.

#
# #

Overstock.com®
is a registered trademark of Overstock.com, Inc. Any other trademarks are the property of
their respective owners.

This press release
contains certain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Such forward-looking statements include all statements other than
statements of historical fact, including statements regarding our ability to
provide deals to our customers, our future cooperation with the SEC and resolving
the SEC staffs concerns in the normal course.
Our Form 10-K/A for the year ended December 31, 2008, our
subsequent quarterly reports on Form 10-Q, or any amendments thereto, and
our other subsequent filings with the Securities and Exchange Commission
identify important factors that could cause our actual results to differ
materially from those contained in our projections, estimates or
forward-looking statements.